Stock Market Commentary for Tuesday, May 17, 2005

Nasdaq's moderately sharp 17.65-point gain on Monday was a relief, but we shouldn't hang too much hope on a nice gain when trading volume is so anemic. Market volatility can be higher when trading volume is light.

Nasdaq did set a new intra-day high and closing high for the latest up-leg, but the light trading volume tells us to tread cautiously.

Unfortunately, with Nasdaq now a mere 5.57 points from the hugely psychological 2,000 level, we can expect more in the way of emotional sentiment than cautious, rational deliberation in the coming days. Any break out above 2,000 needs to be on heavy volume for at least two or three days.

The New York Fed Empire State Manufacturing Survey was a big disappointment, but it's hard to attach too much importance to a single data point. Six-month expectations for survey respondents remain fairly rosy.

Nasdaq trading volume was very light (1.43 billion shares), and breadth was moderately positive, with 1.54 gainers for each loser. With such light volume, we cannot consider this a true (durable) "rally."

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-- Jack Krupansky